The Currency Converter

The US Dollar is basking in it’s safe haven status this morning after risk averse investors piled their money into the Greenback. With the Thanksgiving Holiday yesterday there is little in the way of any significant news coming out of the States as trading was limited. With questions still surrounding the Euro debt crisis the dollar did however benefit from the market’s hatred of uncertainty and we saw the two month highs versus the euro as it dropped down to below $1.33 and also saw gains versus the pound reaching an overnight 6 high of 1.5688 with both the US Dollar and the Japanese Yen strengthening while investors wait for any significant market change of direction.

Written by Luke Trevail

GBPUSD traded at $1.5789 having earlier weakened 0.2 percent to $1.5742, its lowest level against the U.S. currency since Oct. 27, as problems in the euro zone prompted some flows into the safe-haven dollar. This combined with the continued geo-political threat in Korea enabled the greenback to continue to make marginal gains. U.S. jobless claims fell to the fewest since 2008. Elsewhere the USD has strengthened as Americans increase spending for the 5th month in a row. They have also filed fewer unemployment claims, both of which suggest that the US economic situation is improving. Stocks have rallied and Treasuries declined as the economic releases yesterday along with the increase in consumer confidence have helped to improve the outlook for the forthcoming holiday season. A North Korean statement after Tuesday’s artillery clash that the South’s action was driving the peninsula to the brink of war earlier prompted investors to seek relatively safer-haven currencies. The dollar also fell 1.2 percent against the South Korean won, erasing some of the 3.2 percent gains made on a volatile Tuesday.

Written by James Rowe

Having initially tumbled against the euro after news of a bail out of the Irish economy was announced, like the pound, the dollar recovered against the single currency in the afternoon after the call by the junior coalition partners in Ireland for an immediate general election.

The political uncertainty in Ireland and the threat of fear of ‘contagion’ from Ireland to Portugal and Spain drove equity markets down worldwide with the Dow Jones losing over 130 points within 2 hours of its opening. This strengthened the US dollar as investors’ sought the dollar’s ‘safe haven’ status. This was further enhanced by heavy falls in the Asian stock markets overnight with news of what some analysts are suggesting is the most serious skirmish between the two Koreas since the end of the Korean war in the 1950′s.

Meanwhile in a quiet data day, US Federal Reserve chairman Ben Bernanke criticised countries like China for running large trade surpluses. In a speech to the European Central Bank he stated that “Currency undervaluation by surplus countries is inhibiting needed international adjustment”.

He said that by buying dollars, these countries were hurting the economic recovery in the US and the global economy with it. Bernanke also defended the Fed’s policy of “quantitative easing”, which has recently been criticised by China and Germany amongst others.

China, Germany and others have attacked the Federal Reserve in recent weeks for its decision to purchase another 600 billion dollars of US government debt in a bid to stimulate the US economy. They say that the policy will unfairly devalue the dollar in currency markets and that this could lead to inflation and asset bubbles elsewhere in the world. The Chinese also argued the Fed had failed to take account of its responsibility for protecting the value of the dollar as a global reserve currency.

The dollar duly made gains against both the pound and the euro yesterday afternoon.
This afternoon sees the revised GDP data for Q3 published in the US which will be studied by analysts for signs of the economic conditions in the US economy.

Written by Tony Redondo